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First Watch to ramp up franchise growth

While breakfast, brunch and lunch specialist First Watch said it hopes to setp up franchising efforts, the 85-unit chain said the continuing lack of access to capital would continue to pose challenges.

The concept, which is 95-percent company-operated, recently signed up franchisees to develop First Watch in Oklahoma City, Milwaukee, Iowa and north central Florida. It also inked a development deal this week calling for the first location in Nashville, Tenn., by the middle of 2011. Over the next several years, First Watch expects to open three to five units in the Nashville area.

Chief marketing officer Chris Tomasso acknowledged that access to capital for potential franchisees remains tight, especially for single-unit “mom-and-pop operators looking to buy themselves a job.” He noted, however, that First Watch’s franchise program targets restaurateurs with experience franchising other concepts.

“It’s probably the worst time to try to franchise, with access to cash and capital being so restricted,” Tomasso said. “To be honest, we’re looking for a different franchise candidate. We’re looking for experienced multiunit operators looking to diversify their portfolio.”

He cited the brand’s franchisee in Milwaukee, who operates several Culver’s units and has long-standing relationships with local bankers, as a prototype for future operating partners. First Watch signs franchise deals with a minimum of three units, and the ideal number of locations would be five, he said.

First Watch began its franchising program in 2009 and currently has three franchised units and four licensed locations. The brand also has grown corporate units rapidly, more than doubling the system from 40 units in 2006 to 85 this year, Tomasso said.

He added that First Watch’s goal is to grow by 11 corporate units and four franchised locations this year. The company aims to have 115 units open by the end of 2012.

Tomasso said the chain has grown its annual same-store sales in each of its 26 years in business. The average check runs approximately $8.70, he said.

First Watch’s abbreviated operating hours — units are open from 7:30 a.m. to 2:30 p.m. every day — have long been a strong selling point for hiring, and that should attract similarly minded franchisees as well, Tomasso said.

He said the company waited to begin its franchising push until it had established a support infrastructure for new operators.

“We didn’t feel we were ready to franchise before, so we just continued to grow the way we grew,” he said. “We didn’t want to expand the brick-and-mortar restaurants faster than our human capital. But now that we’re entering the franchise arena and have 26 years of history and sales success, having such a large base of company restaurants puts a potential franchisee at ease,” he said, adding that the average unit volume is “just shy of $1.2 million.”

Tomasso also said the company has not been deterred by the intense competition for breakfast throughout the restaurant industry. Instead, he said he expects it would help First Watch’s growth.

“There’s part of it which overall is raising awareness in general about breakfast, and we’re taking the rising tide with all boats,” he said. “We’re happy to ride the wave of other chains with huge marketing budgets.

“Breakfast is one meal where you could convert somebody from eating at home or in their car to an in-restaurant experience, whereas other meals, you’re trying to steal a visit from a competitor,” he said. “We built ourselves up for years on word-of-mouth, so if overall awareness of breakfast rises, that’s good for us.”

Bradenton, Fla.-based First Watch operates in 11 states.

CORRECTION: An earlier version of this story misstated that First Watch’s franchise model of recruiting multiunit operators with experience franchising other concepts reflected a change from a strategy involving single-unit franchisees. Since it began franchising in 2009, First Watch has targeted restaurant industry veterans to franchise its concept in multiunit agreements.

Contact Mark Brandau at [email protected].

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